Costa Rica Launches 2 Venture Capital Funds for SMEs

The two funds will invest up to $400 million in local startups

Two venture capital investment funds dedicated to injecting capital and strategic knowledge into small and medium-sized companies (SMEs) have been launched in Costa Rica.
June 14, 2022 | 12:30 PM

San José — Two venture capital investment funds dedicated to injecting capital and strategic knowledge into small and medium-sized enterprises (SMEs) have been launched in Costa Rica.

The launch follows the promulgation in 2020 of the regulation for venture capital investment funds, which aims to improve the conditions for financing SMEs and diversify the capital market.

Each fund will be allowed to raise up to $200 million, one of them will be focused on companies in the tourism sector, one of the main generators of foreign exchange in Costa Rica, and the second fund will not have a specific industry niche, with any company that meets the requirements able to apply to access funding.

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In a press conference chaired by , explained how these funds will operate and what their functions are.

These first two funds are managed by Grupo Mutual, under the figure of Mutual SFI, and FCS Capital, according to the announcement made during a press conference by Economy, Industry and Commerce Minister Francisco Gamboa, César Restrepo, director general of the country’s stock exchange (BNV); Miguel Aguiar, executive director of the country’s development bank (SBD), and Allan Rodríguez of FCS Capital and Yancy Cerdas, a manager at Mutual Valores.

How do they work?

Companies seeking to access the funds must be SMEs, according to the Economy, Industry and Commerce Ministry’s definition of the Ministry of Economy, Industry and Commerce (MEIC), have been operating for at least five uninterrupted year, and be committed to the adoption of good Environmental, Social and Governance (ESG) practices.

The main objective of the two funds is to identify companies that before the pandemic had a solid track record, but due to the situation of the last two years have seen their cash flow situation dry up and require other innovative sources of financing.

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“For businesses, it is very difficult to compete internationally with companies that have much healthier capital structures, they are more complex, and the risks are more aligned with respect to the way they are financed,” Allan Rodríguez of FCS Capital said.

“In Costa Rica there are only two possibilities, either go to the bank or find a partner, using their own resources, to raise capital for a company, and that is really rudimentary. The idea is to start developing the Costa Rican capital market through this type of fund,” he added.

Translated from the Spanish by Adam Critchley